Competition Bureau submission to the OECD Competition Committee roundtable on Remedies in Cross-Border Merger Cases
October 29, 2013
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- Framework for international cooperation in reviewing mergers
- Increased collaboration in reviewing mergers
- Important merger reviews involving cross-border remedies
- Canada’s Competition Bureau (the “Bureau”) is pleased to provide this submission to the OECD Competition Committee Working Party No. 3 roundtable on “Remedies in cross‑border merger cases”. The Bureau, headed by the Commissioner of Competition (“Commissioner”), is an independent law enforcement agency of the Federal Government of Canada responsible for the administration and enforcement of the Competition Act (the “Act”)Footnote 1 and certain other statutes. The Mergers Branch of the Bureau is responsible for conducting merger reviews to determine whether a merger is likely to lessen or prevent competition substantially. In carrying out its mandate, the Bureau strives to ensure that Canadian businesses and consumers have the opportunity to prosper in a competitive and innovative marketplace.
- Recognizing the importance of international cooperation to the fulfilment of the Bureau’s mandate in an increasingly globalized economy, the Bureau has sought to further develop its formal and informal framework for international cooperation in reviewing mergers, which is discussed further below. This submission also describes the Bureau’s experience in several recent merger reviews that involved significant cooperative efforts between the Bureau and its foreign counterparts and that led to the implementation of important remedies to preserve competition in Canada and other jurisdictions.
2. Framework for international cooperation in reviewing mergers
- There are a number of agreements and arrangements that provide a framework for engaging in international cooperation in the enforcement of competition laws.Footnote 2 In the context of civil enforcement (including merger review), these include nine free‑trade agreements; four state‑to‑state cooperation agreements; five agency‑to‑agency cooperation agreements; and two memoranda of understanding. Together, all of these forms of agreement facilitate the formal exchange of information with seventeen foreign jurisdictions.Footnote 3
- In addition to these agreements, the Act also sets out a framework for treating confidential information that guides how the Bureau interacts with foreign competition agencies. In particular, the Act requires that all information provided to or obtained by the Bureau, including the identity of any persons who have provided it, remain confidential. The Act contains exceptions that allow the Bureau to communicate such information to a Canadian law enforcement agency, or for the purposes of the administration or enforcement of the Act.Footnote 4 Where the communication of confidential information to a foreign counterpart would advance a specific investigation, such communication would be considered for the purpose of the administration or enforcement of the Act.
- It has been the Bureau’s experience, however, that where the Bureau is seeking to engage in discussions with foreign agencies that would involve the exchange of confidential information, the foreign agency must first receive the appropriate form of waiver from the merging parties and/or affected third parties.Footnote 5 In the vast majority of instances, such waivers are readily provided upon request.
- The Bureau often cooperates extensively with foreign agencies throughout significant multi‑jurisdictional merger reviews, including:
- participating in joint conference calls with the parties and third parties;
- discussing industry background and dynamics, approaches to market definition and competitive effects analyses;
- sharing and discussing documents and other information obtained from merging parties and third parties; and
- coordinating on merger remedies.
- The Bureau will coordinate with other competition authorities on remedies when a multi‑jurisdictional merger is likely to have anti‑competitive effects in Canada that are similar or related to those that are likely to result in other jurisdictions. Consistent and coordinated remedies help avoid potential friction stemming from situations where a remedy in one jurisdiction may not be acceptable in another, and can lead to more efficient and effective resolution than would be attained through independent enforcement action.Footnote 6
- To resolve competition concerns within Canada, the Bureau may either take specific action or it may determine that action taken in a foreign jurisdiction is sufficient to resolve any Canadian competition concerns.Footnote 7 Examples of cases in each of these categories are discussed later in this submission.
- Our ability to coordinate merger reviews with foreign agencies was significantly enhanced in 2009 as a result of substantial amendments to the merger provisions of the Act. Among other things, the amendments introduced a two‑stage merger review process that has more closely aligned the timing and conduct of our merger review process with those of our major trading partners, particularly the U.S. Increasingly, parties are commencing the merger review process in Canada at the same time as in other jurisdictions, in particular the U.S., which facilitates increased collaboration among agencies throughout the merger review process.
3. Increased collaboration in reviewing mergers
- The increased importance of international coordination to achieving desirable outcomes for Canadians has prompted the Bureau to engage in a broad array of activities to enhance collaboration with its foreign counterparts, particularly those agencies with which the Bureau interacts regularly. The Bureau works co‑operatively with both domestic and international enforcement partners at all levels, in order to increase the effectiveness of our enforcement activities, and the enforcement activities of our partner agencies at home and abroad, and to build a more effective and efficient effort in competition enforcement both within Canada and globally.Footnote 8
- A great deal of valuable cooperation can take place informally, without the exchange of confidential information. The Bureau engages in informal cooperation through participation in bilateral meetings with many of its foreign counterparts where senior managers discuss case‑related issues such as investigative steps, timing, and settlement approaches. Further, the Bureau has found that developing strong working relationships with other competition agencies through multilateral organizations, such as the International Competition Network and the OECD, has had a positive impact on our ability to cooperate when cases of mutual interest arise.Footnote 9
- Given Canada’s close and integrated economic relationship with the U.S., the Bureau often consults with the U.S. agencies where there appear to be similar, if not the same, competition issues arising from a particular merger. For this reason, our relationships with the U.S. Federal Trade Commission (“U.S. FTC”) and the Department of Justice Antitrust Division (“U.S. DOJ”) are well established.
- In 2010, with a view to further deepening relationships between the mergers staff at the three agencies, the Bureau, U.S. FTC and U.S. DOJ established a mergers working group. In bringing together team leaders from the three agencies, the goal of the group is to enhance working relationships and improve the understanding of the merger review process in both countries by discussing lessons learned from past cases and strategies for addressing common challenges. The group has met three times to date, and a fourth meeting has been scheduled. Topics of discussion, which are set by the team leaders, have included: the use of supplementary information requests and second requests; the use of timing agreements; document review strategies; and the use of economic and industry experts. The sharing of best practices has allowed team leaders at each agency to learn from others’ approaches to merger review and their experiences dealing with novel issues. Initiatives are also underway to deepen relationships with colleagues at the Competition Directorate of the European Commission (“EC”) and the United Kingdom’s Office of Fair Trading (“OFT”).
- A number of recent staff exchanges within the Mergers Branch have further deepened our understanding of merger review and relationships with staff in foreign jurisdictions. The Mergers Branch recently welcomed staff from the U.S. FTC and the Korea Fair Trade Commission, and has sent officers on secondment to the U.S. FTC and the OFT.
- These efforts to enhance relationships with colleagues around the world are having a tangible positive impact on cross‑border and multi‑jurisdictional cases, ultimately facilitating more efficient and stronger reviews.
4. Important merger reviews involving cross‑border remedies
- The following is a discussion of the Bureau’s experiences on a number of important merger cases from the last five years where the Bureau collaborated closely with its foreign counterparts to resolve competition concerns through remedies. As mentioned above, in some of these cases, the implementation of a remedy in another jurisdiction was determined to be sufficient to address Canadian concerns, such that there was no need for a consent agreement in Canada. In addition to the obvious benefits to merging parties, it is a sensible and constructive approach to the Bureau’s use of scarce resources.Footnote 10
4.1 UTC/Goodrich (2012)
- In September 2011, United Technologies Corporation (“UTC”) and Goodrich Corporation (“Goodrich”) announced that they had entered into an agreement whereby Goodrich would become a wholly‑owned subsidiary of UTC. UTC and Goodrich, both American companies, were engaged in the manufacturing and supply of various aviation parts and components to aircraft manufacturers around the world. The Bureau found that the transaction would likely have resulted in a substantial lessening of competition in the manufacture and sale of certain aircraft products, resulting in harmful downstream effects in Canada. In July 2012, the Bureau announced that it had concluded its review and had relied on remedial orders issued by the U.S. DOJ and EC to resolve its concerns. The fact that no Canadian assets were involved was an important factor the Bureau considered in determining that it did not require a consent agreement with the parties.
- The Bureau cooperated closely with both the U.S. DOJ and EC throughout all phases of the review. The merging parties provided the U.S. DOJ and EC with waivers, which removed the barriers to the sharing of confidential information. Because the agencies determined that the relevant aviation product markets were mostly global in scope, international cooperation was particularly fruitful.
- Throughout the review, the three agencies jointly conducted a large number of market contacts, which was of significant benefit to the Bureau. In reviewing mergers where a significant volume of the assets and business activity – sometimes referred to as the “center of gravity” of a transaction – is outside of Canada, the Bureau derives a particularly significant benefit from collaboration with foreign agencies. Without collaboration on this case, it might have proved challenging for the Bureau to adequately engage with third parties outside of Canada, particularly those that had already cooperated extensively with other jurisdictions.
- The U.S. DOJ and the EC ultimately came to agreements with the parties whereby UTC would divest assets related to Goodrich’s engine generators business and engine control systems, as well as agree to certain other commitments. The Bureau engaged with the U.S. DOJ and EC in discussions related to these remedies, including identifying assets to be divested. Each agency acknowledged in its press release, issued on the same day, the extensive cooperation between the three agencies that resulted in a coordinated remedy to preserve competition.Footnote 11 The Bureau was not directly involved in the process of identifying a buyer of the divested assets and no monitor was appointed in Canada.
4.2 Novartis/Alcon (2010)
- The Bureau determined that the proposed acquisition by Novartis AG (“Novartis”) of control of Alcon, Inc. (“Alcon”) was likely to result in a substantial lessening of competition in Canada for the supply of certain ophthalmic products; namely, multi‑purpose solution contact lens cleaners/disinfectants; injectible miotics; and ocular conjunctivitis drugs. To remedy these concerns, the Bureau entered into a consent agreement with the parties,Footnote 12 which required Novartis to sell the assets and associated licenses related to the sale in Canada of three of its products to a third party purchaser.Footnote 13
- Over the course of the review, the Bureau collaborated with the U.S. FTC and the EC. The U.S. FTC and EC obtained the appropriate waivers to allow the sharing of confidential information. The U.S. FTC began its review earlier than the Bureau, and ultimately negotiated a remedy that required Novartis to divest its injectible miotic drug to a third party.Footnote 14 The U.S. FTC did not have concerns with respect to any other products.
- The Bureau determined that the geographic markets for the problematic assets were national in scope and found that competitive conditions differed across jurisdictions. The EC came to the same conclusion with regards to various European markets. The Bureau and the EC, therefore, identified additional markets of concern beyond those addressed by the U.S. FTC and engaged in further remedy discussions with the merging parties. The merging parties proposed remedies, and the Bureau and the EC collaborated in the evaluation of those proposals. Ultimately, in addition to requiring the same divestitures as the Bureau, the EC required that Novartis divest a number of other products across its Member States.Footnote 15
- In this case, because markets were national and competitive conditions differed in each jurisdiction, it was necessary for the Bureau to enter into a consent agreement with the parties to address competition concerns with regards to the activity in Canada.
- The Bureau and the EC collaborated to identify a joint purchaser of some of the divested assets.Footnote 16 Where appropriate, it can be very efficient when agencies work together to appoint a single purchaser to operate divested assets across jurisdictions.
- The Bureau and the EC each appointed the same monitor in this case. The monitor was initially proposed by the parties and ultimately approved by both agencies. The monitor, who also acted as a divestiture trustee, identified a proposed purchaser of the assets that was also approved by both agencies. In this case, as well as in other recent cases,Footnote 17 the Bureau has found the use of the same monitor across jurisdictions to be efficient and effective.
4.3 Ticketmaster/Live Nation (2010)
- In February 2009, Ticketmaster Entertainment, Inc. (“Ticketmaster”), the world’s largest provider of ticketing services, and Live Nation, Inc. (“Live Nation”), the largest promoter of live events globally, announced their intention to merge. Prior to the proposed merger, Live Nation had also intended to enter the Canadian ticketing services market in direct competition with Ticketmaster. The Bureau conducted an in‑depth review, working closely with the U.S. DOJ to coordinate parallel reviews of the proposed merger. In January 2010, the Bureau and the U.S. DOJ announced on the same day that they had reached a mutually acceptable resolution that would resolve competition concerns in both jurisdictions.Footnote 18 The set of structural and conduct remedies agreed to by the merging parties were memorialized in Canada through a consent agreement with the parties as well as through a consent decree in the U.S.
- In this case, the willingness at the team level to engage in extensive cooperation from the outset of the review proved instrumental in developing the trust required to design and implement a mutually agreeable set of robust remedies. In addition to detailed discussions on the industry in each jurisdiction, relevant product market, and potential competitive effects, the teams were able to benefit from aligned document review given the significant overlap in document productions made to both agencies. The extensive cooperation between the Bureau and the U.S. DOJ throughout this case, including in the negotiation of remedies, has been referred to publicly on numerous occasions by both agencies as an example of how effective cooperation can lead to mutually agreeable resolutions.Footnote 19
4.4 Nufarm/A.H. Marks (2010)
- In March 2008, Australian chemical company Nufarm Limited (“Nufarm”) completed the acquisition of United Kingdom‑based A.H. Marks Holding Limited (“A.H. Marks”). Later in 2008, the Bureau and the U.S. FTC initiated parallel reviews of the transaction and ultimately determined that it raised significant competition concerns in the sale of certain raw herbicides to agricultural formulators, retailers and farmers. On July 28, 2010, the U.S. FTC announced it had reached an agreement with Nufarm whereby Nufarm would sell the rights and assets associated with two herbicides to competitors, and modify agreements with two other companies to allow them to compete in the market.Footnote 20 On the same day, the Bureau announced that the consent decree between Nufarm and the U.S. FTC, along with written commitments made by Nufarm to abide by the same terms in Canada, adequately resolved competition concerns in Canada.Footnote 21
- Collaboration between the Bureau and the U.S. FTC throughout the review was extensive. Among other things, the agencies shared economic analysis, conducted joint interviews with third party market participants, negotiated remedies with the merging parties, and jointly contacted potential purchasers of divested assets.
- The Bureau and the U.S. FTC worked together to design remedies that would resolve competition concerns in Canada and the U.S. Both agencies were involved in the negotiation process that led to the formalization of the U.S. FTC’s consent decree. A unified approach to the negotiation of remedies was efficient and effective for the agencies and the merging parties.
- While the Bureau’s collaboration was mostly with the U.S. FTC, the Bureau also discussed the transaction with the OFT and Competition Commission in the United Kingdom and the Australian Competition and Consumer Commission.
- The Bureau’s recent experience in collaborating with its foreign counterparts in the design and implementation of remedies has been overwhelmingly positive. In each of the cases discussed in this submission, Canadian consumers and businesses have benefited from the resolutions achieved through collaboration. The Bureau has, however, encountered some general challenges in the context of cross‑border merger reviews that it has sought to address with recent initiatives, including enhancing working relationships at the staff level.
- The Bureau recognizes that, more often than not, Canada is perhaps the net beneficiary of its collaboration with foreign jurisdictions in the review of cross‑border mergers. This flows naturally from the reality that the center of gravity of a multi‑jurisdictional merger is more often in the U.S. or Europe than in Canada. While this has many benefits for the Bureau,Footnote 22 it can also present certain challenges, particularly related to timing.
- Although concurrent filings in Canada and other jurisdictions have become more frequent since the 2009 amendments to the Act, on occasion, merging parties will provide their formal notifications to the Bureau after filing in other jurisdictions. This can limit to some degree the mutual benefits to cooperation among agencies. When jurisdictions are able to closely align the timing of their reviews on mergers where the same or similar issues or concerns are being examined, agencies are more likely to have the incentive to develop a collaborative approach to the investigation and ultimately the negotiation of remedies.
- In recent years, it has been the Bureau’s experience that where waivers are required by a foreign agency to facilitate cooperation on a parallel merger review, such waivers have been readily provided by merging parties and third parties. However, in certain cases, waiver delays have limited two‑way communication in the initial stages of a review. As is demonstrated by the case examples above, cooperation early in the review can be important to the development of an effective parallel review, leading to the design and implementation of mutually agreeable remedies in later stages.
- For this reason, the Bureau believes international cooperation would benefit from parties providing waivers immediately upon notification for those more complex transactions that are notifiable in multiple jurisdictions. In addition, the Bureau believes that the inclusion of information gateway provisions in competition legislation, such as section 29 of the Act, would allow for greater reciprocity in information exchange.
5.3 Building and maintaining relationships
- Successful cooperation depends on the willingness of staff to engage with colleagues at other agencies and devote the necessary resources to achieve mutually beneficial cooperation. This is true regardless of the extent to which formal policies and procedures are in place to facilitate international cooperation. This is one of the reasons informal cooperation, whether through multilateral organizations, bilaterals, or staff‑level initiatives like the team leader meetings described above among the Bureau, U.S. FTC and U.S. DOJ, have been instrumental in facilitating stronger multijurisdictional reviews and important coordinated remedies.
- This submission provides an overview of the Bureau’s experience designing and implementing remedies in tandem with its foreign counterparts on recent cross‑border merger reviews. Collaboration is often critical to conducting efficient reviews and achieving effective remedies, and the Bureau is open to working with other jurisdictions to address challenges raised at this roundtable.
- The Bureau’s framework for international cooperation continues to evolve to facilitate stronger multi‑jurisdictional reviews. Recent convergence in legislation has aligned the Bureau more closely with its major trading partners, and more informal initiatives like the mergers team leader meetings will continue to deepen our understanding of the practices of our foreign colleagues and strengthen staff relationships at the team level.
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